Maybe this is Valentine’s week, but the topic that is breezing all over India is– what new this government would bring to the table of cryptocurrency. Maybe people are unaware of the technicality of the crypto-world and its blockchain process, but the reason for mass interest in the subject is because of the two reasons.
First, for the investors, crypto investment can bring huge returns, which is why it grabs the eyes of the investors to earn a boomy profit. And secondly, for the government, curiosity comes as it has ‘No Base.’ I mean, it does not have a legal, physical form, neither physical regulators nor physical institutions.
It just exists in the digital form whose “ups and downs” solely depend upon the speculation. It indeed has purchasing power and works as a medium of exchange (with limited acceptance), but lots of uncertainties are there too, which is why the government is concerned.
But here is the twist, the government is not ready to legalize cryptocurrency but wants the investors to pay tax out of that earned profit from the Crypto.
Recently, while discussing the Budget session of Parliament on Friday, Finance Minister Nirmala Sitharaman stated that the government has the sovereign right to tax profits made from cryptocurrency transactions. Moreover, the government will decide to ban or not ban cryptocurrencies in India after consultations.
In a budget speech, FM announced a proposal to tax profits from virtual digital assets at a fixed rate of 30%, regardless of the individual’s income tax rate. In addition, a 1% tax withholding tax (TDS) is levied on the transfer of assets above a certain threshold.
In addition, deductions of expenses or allowances are not permitted when calculating income from transactions of such assets. It also states that losses from the transfer of virtual digital assets may not be offset by other income.
In her Budget speech, the Finance Minister also mentioned that the Reserve Bank of India (RBI) would launch a digital currency or digital rupee this year, backed by blockchain technology. She assured that the Central Bank
Digital Currency (CBDC) launch would significantly boost the digital economy and lead to a more efficient and cheaper currency management system.
Even Reserve Bank of India (RBI) Governor Shaktikanta Das warned investors about cryptocurrencies and said they needed to invest at their own risk. Das told investors to remember that it was his “duty” to warn investors that they were investing at their own risk.
Comparing it with “Tulip Mania”, Das said, “cryptography threatens macroeconomic and financial stability where cryptocurrencies don’t even have the value of exotic flowers.”
The 17th century “Tulip Mania” is often a classic bubble example. In this bubble, something goes up in price, not because of its intrinsic value but because speculators want to sell exotic bulbs to make a profit.
So what is the thing that is troubling everyone in the country? Suppose the Indian government is so concerned about the legality and acceptance of cryptocurrency. In that case, they should come forward with some action and plan to create a base to legalize it.
But before doing anything in this regard and penalizing the public with the tax on their earned profit is a not so welcoming step. If they had accepted and legalized it and put through the tax charge after that, that would have given more meaning to this step, I guess.